The GameFi Industry and how NFTs are Revolutionizing Gaming

The gaming industry has seen a massive evolution with the introduction of blockchain technology. In fact, by leveraging the power of decentralized finance (DeFi) and non-fungible tokens (NFTs), games are essentially becoming an extension of our real world because they value the player’s time and have a real-world value associated with them.

The GameFi, as it is called in the crypto sphere, is now larger than ever, with hundreds if not thousands of blockchain-based games being developed regularly, and the top ones out there have been dominating the crypto space for years.

Today, we are going to be jumping into the sphere of GameFi, and discuss how DeFi and NFTs changed the gaming sphere for the better.

But before we dive too deep into the world of GameFi, play-to-earn (P2E) games, and DeFi, we must first go over what each of these technologies is and what they have contributed to the overall growth of the space. 

Non-Fungible Tokens (NFTs) and Their Role in GameFi

Non-fungible tokens (NFTs) are essentially cryptocurrencies that are indivisible, where every single cryptocurrency that is minted as an NFT is fully unique in its own way.

A fungible token, for example, would be a cryptocurrency that is equal in value to another token. Let’s say that you buy 1x Ether (ETH); well, that 1x Ether (ETH) will always be equal in value to any other 1x ETH.

If you bought a $100 bill, it would always be interchangeable with another $100 bill. NFTs aren’t really like this due to the fact that each NFT has unique properties associated with it, which differ in value.

Furthermore, they can be used to represent tangible and intangible items and were primarily launched on top of the Ethereum (ETH) blockchain using the ERC-721 token but, over time, became widely available throughout numerous other blockchains.

Discussing NFTs, it is also important to remember that they are non-interoperable, indivisible, indestructible, and tokens that can easily and always be available for verification due to the fact that they are minted on top of blockchains that have a public ledger that anyone can review and explore, where they can see the wallet addresses which originally created the NFT in question.

Furthermore, due to the fact that blockchains have a high level of cryptography, as well as a decentralized network of nodes or miners that operate the network, it is almost impossible for someone to destroy or remove an NFT and the ownership surrounding them. Additionally, NFTs cannot be replicated, and each of them features its own unique properties that allow us to differentiate them.

Every single NFT will feature metadata that will have information relating to its original creator, which can be extremely handy when it comes to verifying each NFT.

Within the sphere of gaming, these NFTs can represent just about anything the player finds or interacts with within the virtual world, such as weapons, skins, food items, land, and so on.

But before we dive in too deep when it comes to what kind of role NFTs actually fill in the GameFi space, we need to go over how GameFi has changed the gaming industry as a whole.

How a DeFi Game Actually Differs from Traditional Games

To truly get a high level of understanding when it comes to how a DeFi game differs when compared to traditional games, we will first need to go over what traditional games actually are, or in other words, what we mean when we say “traditional games” and how their system works.

These games are typically developed by an online-based company and massively multiplayer online role-playing games (MMORPGs). What this means is that players can sign up for an account, pick a character design, select a class, and start exploring the world, as well as solving specific missions within it as a means of getting in-game rewards.

Most of these games also feature micro-transactions, where a player would essentially use their credit card, debit card, or e-wallet as a means of purchasing an item, which is typically a skin, weapon, experience (EPX) booster, or anything else that they might mean as a means of making their overall experience a lot better in the long-term.

However, the main issue which has been a part of this business model and industry in the eyes and from the players’ perspective is that the companies have full control and ownership of all those in-game items.

Users are literally paying the companies for in-game items that can never get turned into real-world money, such as USD, for example, again at any point in the future. Players are essentially pouring money into virtual items stored in the company’s centralized servers, where the company still holds all of the ownership for those items. 

While specific games have allowed the ability for players to sell those items for in-game currency, they could not, at any point in time, cash them out in USD unless they sold the entire account, which is restricted and can lead to a permanent ban in a majority of these games. Imagine paying money for virtual goods that you can see that are tied to your account but do not have full ownership over them; that is what we mean when we say traditional gaming.

This is where we can jump into DeFi gaming and how this model has revolutionized how players feel about and deal with in-game items and gaming as a whole.

With the introduction of non-fungible tokens (NFTs), players saw that they could essentially tokenize anything, including any virtual item that could be exported as an image, video, or sound. 

Companies also caught sight of this and developed their games around this business model. This is where we saw the rise of play-to-earn (P2E) gaming.

Now, when we look at play-to-earn (P2E) gaming, as the name might imply, this is essentially a gaming model where players get rewarded for playing the game in numerous ways.

Most of the time, in most cases, a game built from the ground up to follow this model will feature a two-token system.

There will be Token 1 (TOKEN1) and Token 2 (TOKEN2). Note that these are not real tokens, just examples that we will be utilizing to explain everything you need to know about their overall utility.

• For example, Token 1 would be the platform’s native cryptocurrency. Think of this token as the one with a higher point of value and as a requirement for players to get in the game, buy in-game items, and receive the currency whenever they sell in-game items. This is the currency that can govern the game, form a decentralized autonomous organization (DAO), or a token that can be staked to secure the underlying blockchain on top of which the game is created. This will be a token that can always get transferred or traded for a stablecoin, or any other popular cryptocurrency, which can later be swapped for FIAT currency. This token represents how players can turn things they get in-game into FIAT currencies such as USD, EUR, GBP, and so on.
• Then there’s Token 2, which is typically the secondary cryptocurrency used within the game that players can simply get by playing the game and then utilize within the game to complete specific goals or tasks. This might be the token they get after they finish each quest or a token that is required to build something on their land, breed monsters, or trigger and enable any other in-game functionality that the game might have. These might also feature a functionality where they can be swapped for another token but will typically be lower in value and utilized in a much different way. 

Now imagine a player spends hundreds of hours grinding away or just playing the game, trying to get the highest-rated, rarest items within the game. 

In traditional gaming, these items would just be left in their account at the point in time when they quit the game, and the only value they would get out of the time, and money commitment in the game would just be the pleasure received and the enjoyment gained from playing the game. This has been the case for decades now.

Furthermore, if the company that originally created the game, to begin with, were to go bankrupt, or close the servers, all of the in-game items would get erased forever and become inaccessible, undervaluing and undermining the entire grind or effort that went into acquiring those in-game items.

Meanwhile, within the realm of GameFi, any in-game items a player ends up receiving will be directly transferred to their cryptocurrency wallets that are tied to the game. 

The game’s underlying blockchain will typically run through the utilization of a decentralized network of nodes, or miners, all of which might store a full copy of the entire blockchain, and this will ensure that whenever a single miner or even full miners or nodes go offline, the blockchain can live on, and the player can, at any point in time gain full access to all of their items in the form of an NFT that they have received or gained by playing the game for years. 

Furthermore, players will always be provided with the opportunity to convert, or in other words, sell any of these in-game NFT items for cryptocurrency, which they can later convert into FIAT currency (USD). 

This essentially means that the player will always be given the opportunity to turn their time and efforts spent playing and mastering the game into real-world currencies, which allows for a much higher level of value associated with the game.

Throughout the span of multiple years in the future, we might even see these GameFi projects become real, actual jobs for players, where they would essentially play 40 or more hours per week and earn a living wage just by experiencing the in-game world and interacting with it in numerous ways, by also having fun and getting enjoyment out of it.

How NFTs Contribute to In-Game Ownership

Now, in order for us to truly understand how NFTs contribute to in-game ownership, we will first need to dive a bit deeper into how they work and what essentially makes them have this high level of utility. 

NFTs are decentralized, and are mined, and can operate on top of a specific blockchain. No central authority can control them and cannot restrict them or censor them, or lock them within a specific project.

Each of these blockchain networks has its own token standard that the NFT creators have to follow, and this allows for a high level of interoperability on supporting networks.

Each blockchain will also have its own set of games, metaverses, or other decentralized finance (DeFi) projects that can be utilized.

An NFT is minted from digital objects and fills the role of a representation of digital or non-digital assets. NFTs, for example, can represent:

• Digital Art – GIFs, collectibles, music, videos
• Real-World Items – a deed to a car, a ticket to a real-world event, tokenized invoices, legal documentation, and signatures.
• GameFi Utility – a specific key to an in-game world, an invitation to an in-game event or concert, a key to specific chests, armor, weapons, or anything else found within games.

An NFT can only have a single owner at any point in time, and this ownership is essentially managed through the uniqueID as well as the metadata that no other token can replicate at all. 

These NFTs are minted through smart contracts, which fill the responsibility of assigning ownership and managing the transferability of the NFTs, and whenever someone creates or mints an NFT, they can execute the code that is stored in the smart contracts. 

This needs to conform to different standards, and in the case of Ethereum, this would be the ERC-721 token standard. This information would then get added to the blockchain where the NFT is managed. 

From a high level, the mining process involves the creation of a block, the validation of information, and the recording of said information on top of the specific blockchain in question.

Now, imagine this process for any game built on top of the Ethereum blockchain or any other blockchain, and you will have a broader level of understanding as to how all of this works and how all of it is tied together. 

By owning an NFT, something players can get by simply playing the game or purchasing it from the in-game store; they are essentially given the ability to easily prove that they own it. Whenever a player earns or buys an NFT, the ownership surrounding that specific NFT is transferred to their wallet through their public address.

The token also proves that it is original, and the private key is the proof-of-ownership of it. 

No one can manipulate this NFT in any way, and the player can sell the NFT or hold onto it forever, knowing that the asset is secured in their wallet by the underlying blockchain.

Now that we know all of this, it is clear that whenever an NFT gets minted in the virtual world, the in-game world that the player is constantly playing in and interacting with, it is transferred to the cryptocurrency wallet that they used to connect to the game, where they have full control and ownership of the NFT in question.

Keep in mind that before engaging with just about any GameFi project, or in other words, any game that is connected to blockchain technology, each player is required to create and then connect with their own cryptocurrency wallet, one that they have full control over the private keys and passphrase on. This is where each NFT and cryptocurrency that they earn in-game will be transferred, so it is extremely important to the overall experience. 

Another interesting aspect surrounding specific projects is that, in some cases, these NFTs can be cross-compatible throughout numerous games. For example, let’s imagine that we have two games that are interoperable at a future point in time. 

You would earn an NFT blade, or cosmetic item, in one game, and due to the fact that the NFT follows the same set of rules and token standards as the NFTs in the second game, you should theoretically be able to transfer the NFT and its overall utility and stats from Game one to Game two. 

This would also mean that your NFT would not just be stuck within a single world. However, this might be far out in the future for the time being.

For the time being, however, there have been projects that have been specifically developed to utilize NFT technology across a wide variety of use cases.

As a player, you could buy virtual land within a game and rent it out, earning passive income. You could also buy virtual real estate, hold onto it for a prolonged period of time and sell it at a higher value than you bought it, similarly to how real-world real-estate works. Many projects are essentially trying to replicate the experience that we would receive in the real world, in their in-game world, as a means of providing a much higher level of utility as well as higher overall rewards for each of the players that engage with the virtual world. 

How GameFi has Revolutionized the Gaming Industry

Decentralized Finance (DeFi) has blown up in popularity at a rapid pace, and due to this growth, developers and creative minds alike have tried to come up with numerous ways through which they can utilize the technology to enhance the previous experience or provide players with access to new experiences.

In other words, all of the NFTs, a player ends up getting within the game can be sold and traded. 

What this means is that players can contribute their time towards playing a game, after which they will receive a non-fungible token (NFT). Once they do so, they can trade that item for any other item that they feel comfortable with doing so on an open marketplace that’s powered by DeFi, or can directly sell the NFT for cryptocurrencies. 

Typically, if an NFT is minted on top of the Ethereum blockchain, it would be bought or sold using the Ether (EHT) cryptocurrency as an example.

In other words, GameFi has enabled freedom that was previously unavailable to players. Remember, prior to GameFi projects, anything a player earned in-game, or won through a championship or through battling within the arena, or through beating a boss raid, and so on, was all tied to their account. 

The company behind the game had full control over all of the items, and all of them were tied to a central server that the company had control over.

Here, in GameFi, everything is stored on decentralized storage solutions through the usage of the public ledger and NFTs, and they are all owned by the individual players who have won them or earned them.

In other words, if a player ends up getting an item, they have full control over it now, not the company. Players can also buy land ownership and rent it out as they would in the real world and, as such, get passive income for their efforts.

They can stake in-game tokens to secure the game and get a monthly return for doing so. They can lock their tokens in specific pools and generate even more money out of them; the possibilities offered by GameFi projects are seemingly endless as a result of this.

We will now be going over some of the most popular GameFi projects or DeFi games that feature play-to-earn (P2E) elements and have dominated the crypto sphere. 

The Most Popular GameFi Projects Currently Available

Now, the choice is seemingly endless when it comes to GameFi projects or games that simply utilize Non-fungible tokens (NFTs) or even play-to-earn (P2E) mechanics.

However, as a means of explaining the GameFi industry further, it is essential that we take a look at some existing and thriving gaming experiences just so you can have a clearer level of understanding of how all of it works and is tied together.

We will first go over one of the newer and popular GameFi experiences that features both GameFi and SocialFi within it. 

STEPN (GMT) and its Impact on the Crypto Space

STEPN (GMT) is essentially a web-3 lifestyle application that is built on top of the Solana (SOL) blockchain network. It essentially combines aspects of play-to-earn (P2E) gaming with a fitness application to create a new category known as “move-to-earn,” coined by the project. 

Within these GameFi projects, players need to essentially buy sneakers in the form of NFTs, after which they can start walking, running, or jogging and earn the in-game currency known as the Green Satoshi Token (GST).

STEPN aims to essentially incentivize millions of users to follow a healthier lifestyle by rewarding their efforts. The app solves several issues, such as proof-of-movement, which proves that users have exercised alongside a functioning GPS system. Furthermore, STEPN even incentivizes users from a financial aspect with special rewards.

All users hate to do is download the app, create a wallet, buy a pair of NFT sneakers, and begin earning in the game’s Solo mode. This app is executed well and is a representation of how GameFi is revolutionizing the crypto space.

Decentraland (MANA) and Its Implementation of The Metaverse

However, it doesn’t end there. Another hugely popular NFT-based metaverse includes Decentraland (MANA). 

This virtual reality platform lives on top of the Ethereum blockchain and aims to enable users to essentially create, experience, and even monetize content and applications. Within this virtual world, users can purchase plots of land and build upon them, after which they can monetize through them. 

The MANA cryptocurrency is native to the project and, given that it’s built on top of Ethereum, follows the ERC-20 token standard but has to be burned to get non-fungible tokens (NFTs) that follow the ERC-721 standard, which is the LAND tokens. 

This is one of the first projects to essentially introduce “The Metaverse” and is divided across 90,601 individual parcels of land, where each of them represents an NFT and is exactly 16m x 16m or 256 square meters and can be found in a specific coordinate within the virtual world. 

The Sandbox (SAND) and Its Introduction to Virtual Freedom

Another extremely popular virtual world played by millions on a global scale is The Sandbox, which is essentially a virtual world that provides each user with the opportunity to create, develop, buy and even sell digital assets in the form of a game.

By utilizing autonomous organizations (DAO) and non-fungible tokens (NFTs), the Sandbox essentially creates a decentralized platform on top of which communities can be built. We can view The Sandbox as a metaverse filled with players who contribute to the future development of the platform. 

It is powered by the SAND cryptocurrency, which is its native cryptocurrency, and it is also built on top of the Ethereum blockchain, which makes SAND an ERC-20 compliant token.

Axie Infinity (AXS) And Its Massive Appeal to New Players

Axie Infinity (AXS) is far from the first blockchain game to implement a card system and breeding mechanics, but it is a game that implemented the systems in place extremely well and became the point of appeal for a lot of players, especially those who are just starting to enter the sphere of blockchain gaming for the very first time. 

Axie Infinity is a game that lets players collect, breed, raise battle, and trade token-based creatures known as Axies.

There are over 500 different body parts that are available, alongside different scales of rarity, such as common, rare, ultra-rare, and legendary, all of which contribute towards the rarity and overall value of each Axie.

Note that each of these Axies is an NFT that has different attributes and strengths and can be utilized in-game in battles, where they can earn experience points (EXP) which are used to level up their stats and body parts, ultimately contributing to an increase in their overall value.

The Axie ecosystem also features a governance token known as Axie Infinity Shards (AXS), which are used as a means of participating within governance, and provide holders with the ability to influence how the funds, which are gathered within the Axie Community Treasury, get utilized. Small Love Potion (SLP) tokens are the second type of tokens utilized within the game and are used for breeding Axies. 

Enjin Coin (ENJ)’s The Interconnected Ecosystem

We cannot talk about interconnected gaming and NFTs without looking at ENjoin Coin (ENJ). Enjin is a company that provides an ecosystem of interconnected and blockchain-based gaming products, where the main offering is known as the Enjin Network.

This Enjin Network is essentially a platform tailored to gaming with social aspects, where users can create websites, clans, and chat as well as host virtual item stores. Enjin Coin is developed on top of the Ethereum blockchain, and as a result, this follows the ERC-20 token standard.

ENJ can be utilized as both a store of value as well as be used to back the value of blockchain assets, such as NFTs.

Every asset that is minted within the Enjin Platform also contains ENJ, which is a minting resource that is locked inside of NFTs and removed from the overall circulation. However, this contributes to a lot of benefits, such as infusing them with reserve value and ensuring their transparency and scarcity. Furthermore, this gives them instance liquidity, provides utility in games and applications, and has other benefits. 

The Future of Blockchain Gaming

When we look at all of the aforementioned projects, as well as all of the other existing projects within the GameFi sphere of crypto, it is clear that they share numerous common traits.

Each project is based on underlying blockchain technology, and each project features one or multiple cryptocurrencies that have a high level of utility associated with them and power the broader ecosystem. 

However, the main goal and the main reason why all of these games were created was to essentially provide the power back to the players. Gaming became a lot more than just virtual items that remained on centralized servers, ultimately owned by the company behind the game, and bound to eventually go offline and disappear with the passage of time as games become low on player bases and ultimately die down.

With NFTs, even if a game eventually crashes, stops being popular, loses its player base, or the developers simply start supporting it, any of the in-game items earned by players remain in the cryptocurrency wallets of those players, which can be sold, and through the procedure of selling them for another cryptocurrency, eventually get turned into FIAT currencies, giving players value back for the time and effort committed towards the game.

However, another thing that cannot be understated is how GameFi brought new life into NFTs, which became a lot more than just collectibles that were idle or unused within the wallets of their owners and holders; however, they had actual utility and usage in the virtual world. Each NFT became carefully crafted and generated to have specific stats and characteristics, all of which defined its overall value.

With all of this taken into consideration, the question in the mind of a lot of players as well as investors is likely where the industry is heading and what the future holds for blockchain gaming.

With the rise of Metaverse, and the push for it from companies such as Microsoft and Meta, it is clear that virtual worlds that replicate traits and functionalities found within the real world are the future, and some blockchain-based projects are at the forefront of this innovation.

It is clear that the future of blockchain gaming will likely be a part of those metaverses, where players will have the option to always engage in some gaming-related activity while residing in these virtual worlds. 

It is also likely that we will see a lot of real-world activities, items, and assets get converted into non-fungible tokens (NFTs), and systems become developed in virtual spaces that can replicate a similar level of experience as the one we might see in the real world. 

However, ultimately, the virtual gaming experiences will be ones where the time and efforts of every single player will be valued, even the ones that decide not to go pro and capitalize on the esports industry, but where even the most casual players can harvest NFTs and profit out of them, potentially even turning their overall gaming experience into a full-time job.

As blockchains become more advanced and technology evolves, it is likely that these games and experiences will have a far lower barrier of entry for a lot of players.